(1 of )A worker installs siding on a home under construction in the Lennar development at Linwood Villas in Santa Rosa.

Observers expect slow growth for county economy in 2012

Real estate sputtered and the wine crop disappointed, but the tech sector rallied and tourism bounced back in Sonoma County in 2011.

Many families and businesses continued to struggle last year, but economists and business leaders suggest the worst may be over for the county's economy.

"We're beginning to see the tide change," said Ben Stone, executive director of the county's Economic Development Board.

Still hovering in the shadow of the recession, 2012 is expected to produce business growth, but at a rate that in earlier recoveries would have been considered sluggish.

"Right now the pace of economic growth is still painfully slow," said Eduardo Martinez, a senior economist who studies the county for Moody's Analytics in West Chester, Pa.

The county's unemployment rate, a key measure of economic health, averaged about 9.9 percent for 2011, down from 10.5 percent in 2010.

This year the unemployment rate is expected to fall to 8.9 percent, but it won't average 7 percent until 2014, Martinez said.

A key reason unemployment remains so high is due to the collapse of the real estate and construction sectors.

While 2011 was expected to be the worst year in a half century for single-family home construction nationally, Sonoma County saw slight improvement.

As of November, builders had received 532 permits for new single- and multifamily homes, compared to 429 for the same period in 2010. Still, the numbers amount to a fraction of the 2,000 homes built annually in the decade before the housing downturn.

In recent months, builders have expressed more optimism for both residential and commercial projects than in the past few years, said Keith Woods, chief executive officer at North Coast Builders Exchange, a Santa Rosa trade group.

"I think there's a chance 2012 begins the rebound," he said.

For existing homes, the median single-family home price was $325,000 for the first 11 months of the year, down 3 percent from the same period in 2009 — previously the worst year since prices plunged. The annual median price is now the lowest in more than a decade. It peaked in 2005 at $595,000.

Foreclosure sales are likely to increase in the coming months, with prices bottoming this year, Martinez said. He doesn't expect measurable increases in home prices until 2013 or 2014.

It wasn't just a bad year for housing. The county's grape growers suffered through bad weather and reduced yields.

The crop was down 20 percent or more from its five-year average and likely was the smallest since 2003, said Nick Frey, president of the Sonoma County Wine Grape Commission. The value could end up around $435 million, nearly 30 percent below 2009.

Growers feel more optimistic for this year, Frey said, but remain cautious "because we don't know which way the economy's going to go."

In contrast, some tech companies showed healthy gains.

Agilent Technologies, the largest tech employer in Sonoma County, announced in the spring that its 8,000 employees worldwide, including 1,100 in Santa Rosa, would get a 14 percent bonus in June. In November, the company's Santa Rosa-based measurement group posted its most profitable quarter in history, powered by demand for ever-more sophisticated smartphones.

And Medtronic's Santa Rosa-based vascular division in November posted $564million in quarterly revenue, up almost 13 percent from the same period a year ago. Medtronic, the world's largest medical device maker, has about 840 employees in Santa Rosa.

Tourism was another bright spot. Hotel occupancy through November was up 8 percent from the previous year, according to the county Tourism Bureau. And as of September, ridership on Alaska Airlines flights to and from Santa Rosa was up 13 percent over the same period in 2010.

Jonathan Coe, president/CEO of the Santa Rosa Chamber of Commerce, said many companies are holding their own because they already have made painful cuts to staff and expenses.

"I think most businesses have adjusted to this difficult new normal," Coe said.

Carolyn Stark, the group's new executive director, said it has launched a business promotion effort similar to one developed in Austin, Texas, which the Milken Institute last year ranked as the fourth-best metropolitan area in the U.S. in terms of creating and sustaining jobs and economic growth.

Sonoma County was ranked 167 in the same survey.

Stark said of Austin, "In 2003 and 2004 they built the plan, and now it's paying off for them."

For the coming year, economic threats remain, especially due to potential debt crises in Europe and elsewhere around the globe. But even if the threats disappear, county residents likely will see relatively high unemployment and rather tepid economic activity.

"We have just have to get used to the idea that the next few years are going to be stable," said Sonoma State University economist Robert Eyler, "but it's just going to be at a lower growth rate."

You can reach Staff Writer Robert Digitale at 521-5285 or robert.digitale@pressdemocrat.com.